City of Fresno Retirement Systems

Transcription

1 City of Fresno Retirement Systems Private Equity Concept and Framework January 24, 2018 Don Stracke, CFA, CAIA, Senior Consultant Oliver Fadly, CAIA, Senior Research Analyst Michael Miranda, Senior Analyst

2 Private Equity Overview

3 Private Markets Research Process Fully Integrated Research Process Customized for Every Client Portfolio Construction & Planning 1. Portfolio Construction & Planning Private markets is not a one size fits all investment class, it offers a broad range of strategies that can be customized based on specific investment objectives. Education & Special Projects Macro Viewpoints 2. Macro Viewpoints What sub-sectors within private markets are most attractive today based on current market conditions? 3. Investment Pacing Based on portfolio objectives, current investments and macro conditions, what future commitments make sense? Fund Monitoring & Plan Reporting Clients Investment Pacing 4. Fund Diligence Rigorous quantitative and qualitative process centered around three key questions: what s the universe of products available, which are the best and when will it be open? 5. Fund Monitoring & Plan Reporting Quarterly client plan reporting supported by dedicated reporting team; ongoing fund monitoring; frequent manager meetings; review and opine on fund changes, amendments, etc. Fund Diligence 6. Education & Special Projects Quarterly market thoughts; webinars; whitepapers and original research; direct access to research team. 3

4 Private Markets Research Team Neil Sheth Partner, Director of Alternatives Research (23 years experience) Berkshire Partners; M/C Ventures; General Atlantic; Morgan Stanley BS, University of Pennsylvania Sean Gill, CFA, CAIA Partner, Alternatives Client Strategy (18 years experience) Cook County State s Attorney; Refco; Smith Barney JD, Loyola University of Chicago; MBA, Notre Dame; BS, Georgetown Private Equity Research Team Jeffrey Roberts Director of Private Equity Research (14 years experience) State Street; Lucent MBA, Babson; BA, Franklin & Marshall Real Assets Research Team Andrew Brett, CAIA Research Consultant (10 years experience) State Street BA, Union College Eric Harnish Senior Research Consultant (23 years experience) State Street MBA, Dartmouth; BA, Duke University Melissa Mendenhall Senior Research Consultant (13 years experience) Panera; Dunkin Brands; HarbourVest; Deutsche Bank MBA, Dartmouth; BS Lehigh Michael Yang Research Consultant (11 years experience) GID, Babson, AEW, UBS MBA, Babson; BS, Boston College Matt Ritter, CAIA Research Consultant (6 years experience) GMO; Brooke Private Equity BS, Northeastern Chris Hill, CFA, CAIA Senior Research Consultant (10 years experience) Entrust, LASERS, Lockheed Martin MBA, MIT; BS, MS, Louisiana State University Brad Rowbotham, CAIA Research Analyst (3 years experience) Merrill Lynch BBA, Univ. Mass. Amherst Oliver Fadly Senior Research Analyst (6 years experience) State Street BA, Bates College Joshua Ko Research Analyst (2 years experience) Global Atlantic Financial Group BS, Boston College William Elcock, CAIA Senior Research Analyst (5 years experience) Holy Cross Investment Office BA, Holy Cross *Timothy Bruce Partner, Director of Traditional Research (10 years experience) Partners HC Investment Office MBA, Chicago; BA, Brown University *Aidan Redmond Research Analyst (6 years experience) Atlantic Trust BS, Quinnipiac University Lily Fenn Research Analyst (2 years experience) BA, St. Anselm College * Traditional Research Team Members who help to cover REITs and other liquid real assets. 5

5 Broad Coverage of Strategies Across Private Markets Broad coverage of strategies Over 2,000 funds tracked across private markets strategies and over 800 manager meetings per year Average of 40 best idea funds become part of the Firm s Focus Placement List ( FPL ) annually Each segment team is responsible for answering four key questions: 1. What is our macro view of the sector? 2. What is the universe of firms with products in the sector? 3. What are the best products? 4. When will the funds be in the market? Teams continually update their views on each of the above questions North American Buyouts & Special Situations North American Non-Core Real Estate Private Equity Segmentation Venture Capital & Growth Equity Europe Buyouts & Special Situations Distressed Investing & Opportunistic Credit Mezzanine & Direct Lending Multi-Managers (Primaries, Secondaries, Co-Investments) Impact Investing (Cross Segment) Real Assets Segmentation Core Real Estate (Privates & REITs) Europe Non-Core Real Estate Energy Asia / EM Buyouts & Special Situations Asia / EM Non-Core Real Estate Global Infrastructure Metals & Mining Agriculture & Timber Real Assets Debt Emerging Manager, MFDB (Cross Segment) Impact Investing (Cross Segment) 6

6 Broad Coverage of Strategies Across Private Equity and Private Credit NEPC s diverse client base makes meaningful commitments to the asset class Over 140 clients with private equity and private credit investments Over $3.0 billion of client commitments across private equity and private credit each year Recommendations (1) by Strategy Recommendations by Geography Recommendations by Fund # Recommendations by Fund Size (2) Venture Capital 4% 16% 7% 5% Growth Equity Buyouts 5% 10% Fund I 9% 7% 11% 12% 14% 20% 8% Special Situations & Turnarounds Fund of Funds Secondaries Mezzanine Debt, Venture Lending & Royalties Direct Lending 58% 33% Global North America Europe Asia/Asia & RoW 30% 8% 16% 15% 21% Fund II Fund III Fund IV Fund V Fund VI+ 35% 22% 34% Small-Cap Mid-Cap Large-Cap Mega-Cap Distressed Debt & Opportunistic Credit Vintage Year Recommendations by Strategy # of FPL Funds Venture Capital Growth Equity Buyouts Special Situations & Turnarounds Fund of Funds Secondaries Mezzanine Debt, Venture Lending & Royalties Direct Lending Distressed Debt & Opportunistic Credit (1) # of FPL funds in each category from 2007through mid-2017 (2) Fund size commitment thresholds: Small-Cap <$500MM; Mid-Cap 7 >$500MM and <$1B; Large-Cap >$1B and <$5B; Mega-Cap >$5B

7 Broad Coverage of Strategies Across Real Estate and Real Assets NEPC s diverse client base makes meaningful commitments to the asset class Over 140 clients with real estate and real asset investments Over $1.5 billion of client commitments across real estate and real assets each year Recommendations (1) by Strategy Recommendations by Geography Recommendations by Fund # Recommendations by Fund Size (2) Vintage Year Recommendations by Strategy (1) # of FPL funds in each category from 2011 through 2016 (2) Fund size commitment thresholds: Small-Cap <$500MM; Mid-Cap 8 >$500MM and <$1B; Large-Cap >$1B and <$5B; Mega-Cap >$5B

8 NEPC at the Forefront of Private Market Opportunities Leading up to, and as a result of the Global Financial Crisis, NEPC publishes whitepaper on instituting an opportunistic credit allocation and underwrites debtor-in-possession and PPIP strategies NEPC publishes consulting industry s first whitepaper on Direct Lending opportunity and begins to evaluate US and Europe-focused managers NEPC underwrites initial managers in US and Europe 2014 NEPC underwrites initial Asianfocused manager 2015 As a result of the dislocation in the energy sector, NEPC underwrites an energyfocused lending manager

9 NEPC Scale Results in Meaningful Fee Savings for Clients Subsequent to the financial crisis, NEPC was an early proponent of direct lending strategies arising from the dislocation in the traditional lending market for middle market companies As a result of our leadership in this segment, we put significant capital to work with negotiated fee savings in the funds we perceived as best of breed: Manager Standard Management Fee NEPC Clients Standard Carried Interest NEPC Clients US Managers Manager A 1.75% 1.50% 20.0% 15.0% Manager B 1.35% 1.15% 10.0% 10.0% Manager C 1.75% 1.00% 20.0% 10.0% European Managers Manager A Fund I 1.25% 0.75% 10.0% 10.0% Manager A Fund II 1.50% 1.25% 15.0% 12.5% Manager B 1.50% 1.05% 20.0% 15.0% Manager C 1.50% 1.25% 20.0% 20.0% Manager D 1.50% 1.125% 20.0% 15.0% Manager E 0.95% 0.80% 10.0% 10.0% Manager F 1.00% 0.75% 10.0% 10.0% Asian Managers Manager A - Initial Investors 2.00% 1.00% 20.0% 10.0% Manager A - Subsequent Investors 2.00% 1.75% 20.0% 15.0% 10

10 Multi-Step, Consensus-Driven Private Markets Fund Diligence Process Sourcing Managers sourced through existing relationships (NEPC s and Clients ), proactive outreach, open-door policy Stage 1: Initial Review Meet with manager, review materials, assess strategy viability, discuss preliminary concerns or issues to address Stage 2: Detailed Review Review and analyze track record attribution, request completion of detailed questionnaires, refine view on areas for additional diligence Stage 3: Full Due Diligence Hold onsite diligence meeting with manager, conduct in-depth reference calls, drill into key issues relevant to ultimate decision, complete formal investment memo and diligence checklist Recommend FPL Funds Approved by NEPC s firm-wide, multi-disciplinary Alternative Assets Committee; implement recommendations in client portfolios

11 Equates to Both a Top Down and Bottom Up Approach to Fund Targeting Macro Analysis Market Surveys and White Papers Fund Comparative Analysis/Targeting/Diligence Fund Investment Memos 12

12 Total Plan Ending NAV Target PE & PD NAV Vintage Year Commitment Paid In Capital Capital to be Funded Cumulative Distributed PE & PD Drawdowns PE & PD Distributions PE & PD Net Cash Flow 1% 15% 21% 3% Current Valuation (NAV) Total Value Net Benefit Call Ratio DPI Ratio TVPI Ratio 3% 8% 7% 14% 10% 18% Buyouts Co-Investments Direct Lending Distressed Energy Fund of Funds Growth Equity Mezzanine Secondaries Venture $2,000.0 $1,800.0 $1,600.0 $1,400.0 $1,200.0 $1,000.0 $800.0 $600.0 $400.0 $200.0 $ Existing PE & PD Investments NAV New PE & PD Investments NAV Existing PE & PD Investments Uncalled Capital New PE & PD Investments Uncalled Capital Target PE & PD NAV Target PE & PD Over Allocation Actual Projected Year Private Equity & Private Debt NAV $234 $398 $554 $1,065 $1,204 $1,209 $1,138 $1,072 $1,023 $1,063 $1,072 $1,151 $1,282 Uncalled Capital Commitments $286 $614 $1,002 $601 $374 $244 $170 $242 $345 $443 $500 $530 $544 PE & PD NAV + Uncalled Capital Commitments $520 $1,012 $1,555 $1,666 $1,579 $1,453 $1,308 $1,314 $1,368 $1,506 $1,571 $1,681 $1,826 Target PE & PD NAV $700 $731 $701 $741 $784 $829 $876 $927 $980 $1,036 $1,096 $1,159 $1,226 Over-Commitment Pace 1.4x 1.4x 1.40x 1.40x 1.40x 1.40x 1.40x 1.40x 1.40x 1.40x 1.40x 1.40x 1.40x Target PE & PD Over Allocation $979 $1,024 $981 $1,038 $1,097 $1,160 $1,227 $1,298 $1,372 $1,451 $1,534 $1,623 $1,716 Beginning Plan NAV $6,048 $6,995 $7,313 $7,008 $7,411 $7,837 $8,288 $8,764 $9,268 $9,801 $10,365 $10,961 $11,591 Yearly Return $947 $318 ($305) $403 $426 $451 $477 $504 $533 $564 $596 $630 $666 Ending Plan NAV $6,995 $7,313 $7,008 $7,411 $7,837 $8,288 $8,764 $9,268 $9,801 $10,365 $10,961 $11,591 $12,257 PE & PD Percent of Total Plan Assets Private Equity & Private Debt NAV 3.3% 5.4% 7.9% 14.4% 15.4% 14.6% 13.0% 11.6% 10.4% 10.3% 9.8% 9.9% 10.5% Private Equity & Private Debt Uncalled Capital Comm 4.1% 8.4% 14.3% 8.1% 4.8% 2.9% 1.9% 2.6% 3.5% 4.3% 4.6% 4.6% 4.4% NAV + Uncalled Capital Commitments 7.4% 13.8% 22.2% 22.5% 20.1% 17.5% 14.9% 14.2% 14.0% 14.5% 14.3% 14.5% 14.9% Target Private Equity & Private Debt Allocation 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% Sample Private Markets Pacing Plan and Analysis Slides Examples from the annual planning and pacing analysis are shown below The goal is to determine annual investments based on macro conditions, plan strategic objectives, and existing investments General Plan Assumptions Existing Plan Investments Plan Projections General Plan Assumptions Total Plan Assets $7,008 Plan Return Assumptions Target Investment Return 7.00% 7.00% 7.00% % Contributions % 0.00% 0.00% 0.00% Total Private Equity & Private Debt Assets $554 Private Equity\ Capital to be Funded $1,002 Payouts % -1.25% -1.25% -1.25% Total Private Equity & Private Debt Exposure $1,555 Expenses % 0.00% 0.00% 0.00% Reserve for Expenses % 0.00% 0.00% 0.00% Total Private Equity & Private Debt Assets / Total Plan Assets 7.9% Net Growth Rate % 5.75% 5.75% 5.75% Total Private Equity & Private Debt Exposure / Total Plan Assets 22.2% Target Private Equity & Private Debt Allocation % (Current Target) 10.0% Plan Data as of: 9/30/2015 Private Equity & Private Debt Data as of: 9/30/2015 Total Projected Plan Assets Actual Projected Total Plan Net Growth Rate 15.7% 4.5% (4.2%) 5.7% 5.8% 5.7% 5.8% 5.7% 5.7% 5.8% 5.7% 5.7% 5.8% Total Plan Beginning NAV $6,048 $6,995 $7,313 $7,008 $7,411 $7,837 $8,288 $8,764 $9,268 $9,801 $10,365 $10,961 $11,591 Yearly Net Growth $947 $318 ($305) $403 $426 $451 $477 $504 $533 $564 $596 $630 $666 Total Plan Ending $6,995 $7,313 $7,008 $7,411 $7,837 $8,288 $8,764 $9,268 $9,801 $10,365 $10,961 $11,591 $12,257 NAV Target PE & PD Allocation 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% Target PE & PD NAV $700 $731 $701 $741 $784 $829 $876 $927 $980 $1,036 $1,096 $1,159 $1,226 Total Projected Plan Assets and Target Private Equity & Private Debt Allocation $14,000 Actual Projected $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 Private Equity & Private Debt NAVs and Exposures Current Capital Total % of Valuation to be Current Total Investment Strategy (NAV) Funded Exposure Exposure Buyouts $59.7 $54.3 $ % Co-Investments $19.1 $133.3 $ % Direct Lending $131.3 $153.0 $ % Distressed $138.4 $73.8 $ % Energy $4.4 $119.8 $ % Fund of Funds $6.0 $44.3 $50.2 3% Growth Equity $61.8 $175.6 $ % Mezzanine $10.4 $9.7 $20.1 1% Secondaries $111.5 $207.6 $ % Venture $11.0 $30.2 $41.2 3% Total / Wtd. Avg. $553.5 $1,001.5 $1, % Private Equity & Private Debt Investments by Vintage Year Private Equity Portfolio Exposure 1997 $37 $35 ($0) $47 $0 $47 $12 96% $60 $60 $0 $32 $0 $33 ($27) 99% $57 $52 ($0) $44 $0 $44 ($9) 93% $129 $126 $1 $127 $1 $128 $1 98% $30 $26 $0 $12 $0 $12 ($14) 87% $0 $0 $0 $0 $0 $0 $0 NA NA NA 2003 $0 $0 $0 $0 $0 $0 $0 NA NA NA 2004 $30 $30 $0 $10 $1 $12 ($19) 100% $20 $20 $0 $10 $5 $15 ($5) 100% $0 $0 $0 $0 $0 $0 $0 NA NA NA 2007 $0 $0 $0 $0 $0 $0 $0 NA NA NA 2008 $0 $0 $0 $0 $0 $0 $0 NA NA NA 2009 $40 $31 $9 $24 $23 $47 $16 77% $0 $0 $0 $0 $0 $0 $0 NA NA NA 2011 $137 $108 $29 $32 $101 $134 $25 79% $53 $33 $20 $17 $26 $43 $10 62% $240 $172 $68 $19 $178 $197 $25 72% $646 $182 $464 $11 $172 $184 $2 28% $460 $49 $411 $4 $46 $50 $0 11% Total Private Equity $1,938 $924 $1,002 $391 $554 $944 $18 48% Total Open End/Liquid $0 Actual Private Equity & Private Debt Plan Projections Projected $ Commitments Drawdowns and Distributions Sub-strategy Allocations Private Market Fund Commitment Targets Private Equity & Private Debt Commitments by Vintage Year $700 18% Actual Projected 15% 16% $600 14% 15% 13% 14% $500 12% 12% 10% 10% 10% 10% 10% $400 10% 8% $646 $300 8% 5% $460 6% $200 $375 $375 $375 $375 3% $325 4% $240 $250 $100 2% $80 $80 $80 $80 $0 0% Total Commitments Projected PE & PD NAV / Total Plan Assets Target PE & PD Allocation (%) Private Equity & Private Debt Commitments by Vintage Year Actual More Certain Less Certain Year Total Commitments $240 $646 $460 $80 $80 $80 $80 $250 $325 $375 $375 $375 $375 Target PE & PD Allocation (%) 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% Projected PE & PD NAV / Total Plan Assets 3% 5% 8% 14% 15% 15% 13% 12% 10% 10% 10% 10% 10% Projected Private Equity NAV / Plan Assets Private Equity & Private Debt Projected Drawdowns and Distributions $500.0 Projected $400.0 $300.0 $200.0 $100.0 $0.0 ($100.0) ($200.0) ($300.0) ($400.0) ($500.0) ($600.0) Projected Year PE & PD Drawdowns ($481) ($306) ($210) ($154) ($178) ($222) ($277) ($319) ($345) ($361) PE & PD Distributions $195 $281 $348 $386 $399 $399 $371 $367 $364 $369 PE & PD Net Cash Flow ($286) ($25) $138 $232 $221 $177 $94 $48 $19 $7 Private Equity Allocation by NAV Actual Projected 100% 0% 2% 2% 0% 1% 3% 0% 1% 3% 0% 1% 4% 0% 1% 4% 0% 2% 4% 0% 3% 4% 0% 4% 5% 6% 6% 4% 0% 4% 0% 4% 0% 90% 20% 19% 16% 16% 15% 17% 80% 21% 23% 0% 2% 0% 26% 27% 26% 70% 11% 17% 18% 17% 15% 13% 1% 11% 60% 1% 1% 1% 1% 10% 2% 10% 10% 10% 3% 4% 50% 25% 13% 14% 16% 5% 16% 6% 6% 16% 14% 2% 12% 2% 9% 8% 7% 40% 3% 3% 4% 4% 4% 4% 5% 5% 30% 22% 19% 14% 10% 7% 8% 11% 14% 15% 15% 24% 20% 3% 11% 13% 14% 15% 15% 14% 13% 11% 9% 8% 10% 11% 8% 8% 9% 9% 10% 10% 11% 12% 13% 14% 0% 0% 0% Buyout Co-Investments Direct Lending Distressed Energy Fund of Funds Growth Equity Infrastructure Mezzanine Open End/Liquid Secondaries Special Situations/Turnaround Venture Private Equity Allocation by NAV + Uncalled Capital Commitments Actual Projected 100% 0% 3% 0% 2% 0% 3% 0% 3% 0% 4% 0% 4% 0% 4% 0% 5% 5% 0% 6% 6% 0% 0% 90% 21% 19% 18% 17% 16% 13% 11% 10% 10% 10% 10% 0% 0% 0% 0% 1% 1% 1% 2% 2% 4% 5% 7% 8% 8% 8% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 80% 0% 0% 0% 15% 15% 15% 15% 16% 15% 13% 11% 9% 8% 8% 70% 10% 8% 6% 6% 6% 8% 8% 9% 10% 11% 12% 60% 20% 22% 22% 22% 14% 15% 14% 19% 50% 14% 14% 16% 40% 14% 15% 14% 14% 14% 16% 19% 20% 22% 22% 22% 30% 18% 16% 15% 12% 9% 7% 8% 10% 12% 12% 12% 20% 10% 12% 13% 13% 14% 13% 12% 11% 9% 8% 7% 10% 7% 8% 8% 9% 10% 11% 12% 13% 14% 14% 15% 0% 0% 0% Buyout Co-Investments Direct Lending Distressed Energy Fund of Funds Growth Equity Infrastructure Mezzanine Open End/Liquid Secondaries Special Situations/Turnaround Venture 13

13 Customized Client Service Approach Quarterly client plan reporting 10 person alternatives reporting team Program summary, history and performance Focus on quality Ongoing fund monitoring Frequent manager meetings / notes access Review and opine on fund changes, amendments, etc. Education and special projects Quarterly market thoughts Webinars and conferences Whitepapers and original research Direct access to research team Quarterly Client Plan Reporting Ongoing Fund Monitoring Education and Special Projects 14

14 Private Markets Education NEPC believes that private market investments play an important role as part of an overall investment plan Low correlation to stocks and bonds Diversification benefits Wide spectrum of strategies to meet risk and return goals Potential to enhance overall portfolio returns We have completed an array of education materials Actions for Clients Market Surveys Investment Due Diligence Reports White Papers Market Chatter

15 YOU DEMAND MORE. So do we. SM NEPC is driven by a love for investing and consulting and serving clients without divided loyalties Providing innovative investment strategies and customized research solutions from professionals grounded in integrity. Attracting and retaining the best investment talent in order to deliver investment advice and insight to meet unique client needs and be the Consultant of Choice.

16 Focused Placement List Performance

17 Private Equity & Private Debt Performance Overview Private Equity and Private Debt Overview NEPC FPL Funds Per Strategy NEPC FPL Recommendations Per Strategy NEPC FPL Recommendations Per Strategy & Vintage Venture Capital 40 Venture Capital 15% 7% 11% 12% 6% 5% 21% 8% 15% Growth Equity Buyouts Special Situations & Turnarounds Fund of Funds Secondaries Mezzanine Debt, Venture Lending & Royalties Direct Lending # of FPL Funds Growth Equity Buyouts Special Situations & Turnarounds Fund of Funds Secondaries Mezzanine Debt, Venture Lending & Royalties Direct Lending Distressed Debt & Opportunistic Credit Distressed Debt & Opportunistic Credit NEPC FPL Funds Per Geographic Focus NEPC FPL Recommendations Per Geography NEPC FPL Recommendations Per Geography & Vintage 40 59% 6% 4% 31% Global North America Europe Asia/Asia & RoW # of FPL Funds Global North America Europe Asia/Asia & RoW NEPC FPL Funds Per Fund Number NEPC FPL Recommendations Per Fund Number NEPC FPL Recommendations Per Fund Number & Vintage 40 31% 8% 16% 10% 15% 20% Fund I Fund II Fund III Fund IV Fund V Fund VI+ # of FPL Funds Fund I Fund II Fund III Fund IV Fund V Fund VI

18 Private Equity & Private Debt Performance Overview Private Equity and Private Debt Overview NEPC FPL Funds Per Fund Size NEPC FPL Recommendations Per Fund Size NEPC FPL Recommendations Per Fund Size & Vintage 40 36% 9% 32% Small-Cap Mid-Cap Large-Cap Mega-Cap # of FPL Funds Small-Cap Mid-Cap Large-Cap Mega-Cap 23% NEPC FPL Funds Per Year of AAC Approval NEPC FPL Recommendations Per Strategy & AAC Approval Year # of FPL Funds Venture Capital Growth Equity Buyouts Special Situations & Turnarounds Fund of Funds Secondaries Mezzanine Debt, Venture Lending & Royalties Direct Lending Distressed Debt & Opportunistic Credit 19

19 Private Equity Performance

20 Private Equity & Private Debt Performance Overview Private Equity Performance Analysis NEPC FPL Median Performance by Fund Vintage Net TVPI Net DPI Net IRR 1.8x 1.2x 18% 1.6x 1.4x 1.0x 16% 14% 1.2x 0.8x 12% 1.0x 0.8x 0.6x 10% 8% 0.6x 0.4x 6% 0.4x 0.2x 0.2x 4% 2% 0.0x x % NEPC Median CA/Thomson One Median NEPC Median CA/Thomson One Median NEPC Median CA/Thomson One Median Fund Vintage # of Funds NEPC Median CA/Thomson One Median Fund Vintage # of Funds NEPC Median CA/Thomson One Median x 1.55x x 0.83x % 9.5% x 1.48x x 0.61x % 10.3% x 1.48x x 0.45x % 11.4% x 1.47x x 0.36x % 13.8% x 1.33x x 0.17x % 11.7% x 1.23x x 0.09x % 11.6% x 1.13x x 0.00x % 8.3% Fund Vintage # of Funds NEPC Median CA/Thomson One Median 21

21 Private Equity & Private Debt Performance Overview Private Equity Performance Analysis NEPC FPL Quartile Analysis Net TVPI Net DPI Net IRR # of FPL Funds # of FPL Funds # of FPL Funds st Quartile 3rd Quartile Too Young to Benchmark 2nd Quartile 4th Quartile 1st Quartile 3rd Quartile Too Young to Benchmark 2nd Quartile 4th Quartile 1st Quartile 3rd Quartile Too Young to Benchmark 2nd Quartile 4th Quartile Fund Vintage # of Funds Benchmarked First Second Third Fourth Fund Vintage # of Funds Benchmarked First Second Third Fourth Fund Vintage # of Funds Benchmarked First Second Third Fourth % 44% 25% 25% % 50% 25% 6% % 13% 56% 25% % 36% 36% 9% % 18% 36% 27% % 27% 55% 0% % 33% 33% 33% % 33% 33% 33% % 33% 0% 33% % 38% 25% 38% % 63% 0% 25% % 25% 50% 25% % 36% 14% 21% % 21% 21% 0% % 21% 29% 21% % 37% 16% 0% % 26% 5% 11% % 53% 5% 11% % 27% 13% 20% % 13% 27% 13% % 40% 13% 13%

22 Private Equity & Private Debt Performance Overview Private Equity Performance Analysis NEPC FPL Quartile Analysis (100%) Net TVPI Net DPI Net IRR Overall Performance 100% 100% 100% 100% 90% 90% 90% 90% 80% 80% 80% 80% 70% 70% 70% 70% 60% 60% 60% 60% 50% 50% 50% 50% 40% 40% 40% 40% 30% 30% 30% 30% 20% 20% 20% 20% 10% 0% 10% 0% 10% 0% 10% 0% Net TVPI Net DPI Net IRR 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile 1st Quartile 3rd Quartile 2nd Quartile 4th Quartile Fund Vintage # of Funds Benchmarked First Second Third Fourth Fund Vintage # of Funds Benchmarked First Second Third Fourth Fund Vintage # of Funds Benchmarked First Second Third Fourth Performance Metrics First Second Third Fourth % 44% 25% 25% % 50% 25% 6% % 13% 56% 25% Net TVPI 26% 36% 21% 17% % 36% 36% 9% % 18% 36% 27% % 27% 55% 0% Net DPI 37% 30% 20% 13% % 33% 33% 33% % 33% 33% 33% % 33% 0% 33% Net IRR 22% 31% 30% 16% % 38% 25% 38% % 63% 0% 25% % 25% 50% 25% % 36% 14% 21% % 21% 21% 0% % 21% 29% 21% % 37% 16% 0% % 26% 5% 11% % 53% 5% 11% % 27% 13% 20% % 13% 27% 13% % 40% 13% 13% Total 86 26% 36% 21% 17% Total 86 37% 30% 20% 13% Total 86 22% 31% 30% 16% 23

23 Private Equity & Private Debt Performance Overview Private Equity Performance Analysis NEPC FPL Quartile Analysis Per Strategy Net TVPI Net DPI Net IRR # of FPL Funds Benchmarked # of FPL Funds Benchmarked # of FPL Funds Benchmarked Fund Strategy # of Funds Benchmarked First Second Third Fourth Fund Strategy # of Funds Benchmarked First Second Third Fourth Fund Strategy # of Funds Benchmarked First Second Third Fourth Venture Capital 5 0% 20% 40% 40% Venture Capital 5 0% 40% 20% 40% Venture Capital 5 0% 20% 40% 40% Growth Equity 5 0% 40% 20% 40% Growth Equity 5 0% 60% 40% 0% Growth Equity 5 0% 40% 20% 40% Buyouts 24 33% 38% 21% 8% Buyouts 24 33% 29% 17% 21% Buyouts 24 25% 33% 25% 17% Special Situations 7 43% 29% 14% 14% Special Situations 7 43% 29% 29% 0% Special Situations 7 29% 43% 14% 14% Fund of Funds 23 26% 39% 22% 13% Fund of Funds 23 61% 30% 0% 9% Fund of Funds 23 35% 26% 30% 9% Secondaries 22 23% 36% 18% 23% Secondaries 22 32% 23% 36% 9% Secondaries 22 14% 32% 41% 14% 24

24 Private Equity & Private Debt Performance Overview Private Equity Performance Analysis NEPC FPL Quartile Analysis Per Fund Geographic Focus Net TVPI Net DPI Net IRR # of FPL Funds Benchmarked Global North America Europe Asia/Asia & RoW # of FPL Funds Benchmarked Global North America Europe Asia/Asia & RoW # of FPL Funds Benchmarked Global North America Europe Asia/Asia & RoW Fund Strategy # of Funds Benchmarked First Second Third Fourth Fund Strategy # of Funds Benchmarked First Second Third Fourth Fund Strategy # of Funds Benchmarked First Second Third Fourth Global 32 19% 34% 22% 25% Global 32 25% 41% 25% 9% Global 32 9% 38% 38% 16% North America 50 28% 38% 22% 12% North America 50 44% 24% 18% 14% North America 50 28% 30% 26% 16% Europe 1 0% 0% 0% 100% Europe 1 0% 100% 0% 0% Europe 1 0% 0% 0% 100% Asia/Asia & RoW 3 67% 33% 0% 0% Asia/Asia & RoW 3 67% 0% 0% 33% Asia/Asia & RoW 3 67% 0% 33% 0% 25

25 Private Equity Education

26 Private Equity & Private Debt Overview & Education Private Equity Overview Private Equity is a source of investment capital provided by institutions and high net worth individuals for the purposes of acquiring interests in companies and/or products Its role in a portfolio is as a return enhancer, with the premium earned over other investment options serving to compensate for the liquidity risk Large investable universe Over $400 billion raised annually across strategies in each of the last three years Over $3 trillion in assets under management, including portfolio value and un-invested capital Two components of private equity/private debt return: Capital Appreciation: Derived from an increase in the value of an asset between acquisition and sale Current Income: Derived from portfolio company operations, loans and leases Investment diversification Not fully correlated with public equities Access to smaller companies and wider range of strategies Source: Preqin. Fundraising and market size data as of December 31,

27 Private Equity & Private Debt Overview & Education How private equity is different from public equity Public Equity Daily liquidity Invested immediately Daily valuations Market pricing Fees as a % of NAV Regulated reporting Benchmark managed Some activism Private Equity Illiquid, 10+ year closed funds Invested over time Quarterly valuations Estimated fair value Fees as % of commitment Transparency varies Managed for alpha Active value creation 28

28 Private Equity & Private Debt Overview & Education Mechanics of Investing in Private Equity Fund Manager Limited Partner Limited Partner Limited Partner Capital Calls Distributions Carried Interest Management Fees Fund General Partner or Managing Member Investment Realization Portfolio Company Portfolio Company Portfolio Company Limited Partner Portfolio Company 29

29 Private Equity & Private Debt Overview & Education Private Equity Economic Return Drivers Private equity managers have multiple levers to create value: Buying low and selling high (multiple arbitrage) Growing EBITDA (through organic revenue growth, cost cutting and making acquisitions) Using leverage Portfolio investments are made throughout the capital structure of target companies Returns are generated through capital appreciation and current income Capital appreciation is realized through the eventual sale of a company Current income is derived from portfolio company operations, loans and leases, with loans typically structured to have rate adjustments and equity kickers Leverage can amplify (positively and negatively) returns from current income and capital appreciation 30

30 Private Equity & Private Debt Overview & Education Spectrum of Private Equity Strategies Private Equity is not a one size fits all investment class It offers a broad range of strategies (and risk/return profiles) that can be customized based on specific investment objectives Illustrative Sub-Asset Class Return Targets Asset Class Strategy Focus Typical Return Targets Venture Early stage innovative / disruptive companies 15% - 20% IRR, 2.0x TVPI Growth Equity Expansion Capital for small, growing businesses 15% - 20% IRR, 1.7x TVPI Buyouts Special Situations Mezzanine Opportunistic Credit Direct Lending Investments to restructure or expand established companies Investments in mature businesses that may be profitable or unprofitable Subordinated debt to grow or restructure companies Investment strategy involving various creditlinked opportunities Primarily floating rate senior and/or unitranche (senior and subordinated debt in one instrument) debt capital used for various situations 17% 20% IRR, 1.8x TVPI 15% 20% IRR, 1.8x TVPI 8% -12% IRR, 1.4x TVPI 13% - 17% IRR, 1.3x-1.8x TVPI 8% - 12% IRR, 1.3x-1.5x TVPI Distressed Debt Companies with Bad Balance sheets 10% - 20% IRR, 1.7x TVPI Secondaries Exchange of Limited Partnership interest in established PE partnerships 10% - 15% IRR, 1.5x TVPI Energy E&P, transmission, storage, etc. of energy sources 10% - 20% IRR, 1.8x TVPI 31

31 Private Equity Fund Structures

32 Private Equity & Private Debt Overview & Education Fund manager fees for private equity are higher and more complex than public equity funds Annual Management Fee Charged as a percentage of commitment (fixed fee) during the investment period Charged as a percentage of net invested capital or NAV after the investment period Generally 1.5%-2.0% fee rates Fund Expenses One-time fund formation and ongoing administrative and operating costs Can add another 0.3%-1.0% to annual expenses Preferred Return Rate of return LPs need to achieve before GP can earn carried interest Typically computed on amounts invested and amounts paid for fees to the GP Generally 8%, but can vary by strategy and manager clout Carried Interest Performance fee paid to the fund manager for profits generated on investments Paid only on realized investments (not on unrealized gains) Generally 20% of realized investment gain Can be lower for lower return strategies or higher for premium managers 33

33 Private Equity & Private Debt Overview & Education Typical Closed-End Fund Lifecycle Fundraising, (0 2 years) The time period that is used by the manager to raise sufficient funds for the strategy Limited Partners make an initial Commitment to the fund Investing (years 1 5) This is time period that managers use to source investment opportunities. The Fund will make investments during the Investment Period, generally the first four or five years of a fund s life Business plans are put into place as the manager seeks to add value. If an investment does not meet expectations the managers will take steps to mitigate the impact of losses Current income may be paid out during the Investment Period (depending on the strategy), though early distributions may be recalled Limited Partners fund their initial commitments as capital is called over time Harvesting (years 4 8) The time period that managers use to exit the investments through one-off asset sales, portfolio company sales, IPOs, and other exit opportunities The proceeds of the realizations are distributed to the fund s investors according to a predetermined schedule, or distribution waterfall, which includes the payment of carried interest to the manager (if applicable) Liquidating (years 7 12) The manager uses this time to exit the remaining investments in the portfolio If the fund life is extended beyond its initial term (as stated in fund legal documents), management fees may be negotiated lower 34

34 Private Equity & Private Debt Overview & Education The J-Curve of private equity cash flows and returns Cash flow pattern of investing in private equity Years 1-3 returns are negative, little income is generated, management fees are collected on committed (not invested) base, business plans established but improvements not yet impacting valuations Years 3-5 returns flatten out and gradually turn positive as notable improvement in company financials justify valuation increases, debt refinancing may generate distributions and some income is received Years 5-10 returns spike as many assets are sold and accumulated increases in value are reflected, and income is received Years flatten out as residual assets are liquidated All years combined leads to what has been termed the J-Curve. Percent of Commitment Percent of Commitment 200% 150% 100% 50% 0% -50% -100% -150% 150% 100% 50% 0% -50% -100% -150% -200% Example of Cumulative Cash Flows from One PE Fund Year Contributions Distributions Net Cash Flows Example of Market Value Exposure and Net IRR from One PE Fund Year Remaining NAV Net IRR 32% 24% 16% 8% 0% -8% -16% Net IRR -24% 35

35 Portfolio Implementation

36 Private Equity & Private Debt Overview & Education Investment Framework and Planning: Building a Private Equity Program In constructing a private markets portfolio there are several key considerations that impact the allocation Decision Implementation Considerations Investment Objectives Investment Thesis Investment Strategy Market Opportunity / Vintage Year Considerations Committee will develop an Investment Policy with goals and guidelines around return objectives, current income and/or capital appreciation, risk and volatility tolerances, liquidity requirements and performance benchmarks Target allocation will determine commitment pace at a high level Annual Investment Plan will determine size of private equity commitments and investment strategy and manager selection based on environment and opportunities available Short Term Investment Objective Long-Term Objective Opportunistic Objective Strategy diversification will impact returns and can mitigate the J-Curve while managing macro-economic risk Manager selection has a dramatic impact upon returns; diversification across managers will mitigate idiosyncratic manager risk Vintage year diversification is critical to the program s success Mitigate vintage year risk through commitment pacing Acquisition / dispositions should be spread over vintage years by manager or by you and should be considered relative to perceived market opportunity 37

37 Private Equity & Private Debt Overview & Education Closed-End Fund Strategies: Outperformance vs. Concentration Risk Expected Dispersion of Returns for Different Fund Types Mean Target Fund Return Outperformance Underperformance Dispersion of Expected Fund Returns Multi-manager Funds Provide significant diversification underlying fund investments over two to four years Good for investors seeking diversification while making few or infrequent investments Considerations include double fees and limited ability to outperform Diversified Funds Provide good diversification investments directly into companies in various industries over four to five years Good for investors seeking some diversification and ability to outperform Considerations include manager-centric risk and vintage year risk Focused Funds Offer the maximum likelihood of outperforming 8-12 investments in very specific geographic areas / industry sectors over four to five years One layer of fees Considerations include limited diversification, manager-centric risk and vintage year risk 38

38 Pacing Plan Process and Case Study

39 General Plan Assumptions Key model inputs include total plan assets, components of net growth rate, and target allocation General Plan Assumptions Total Plan Assets $1,870 Plan Return Assumptions Target Investment Return % 6.7% 6.7% 6.7% Total Private Equity Assets $191 Contributions % 12.9% 11.6% 6.9% Private Equity Capital to be Funded $170 Payouts % (8.7%) (8.0%) (7.4%) Total Private Equity Exposure $361 Expenses % 0.4% 0.3% 0.1% Reserve for Expenses % 0.0% 0.0% 0.0% Total Private Equity Assets / Total Plan Assets 10.2% Net Growth Rate % 11.2% 10.6% 6.3% Total Private Equity Exposure / Total Plan Assets 19.3% Target Private Equity Allocation % (Current Target) 12.0% Plan Data as of: 11/30/2016 Private Equity Data as of: 9/30/2016 Total Projected Plan Assets Actual Projected Total Plan Net Growth Rate 15.0% 9.3% 10.3% 11.2% 10.6% 6.3% 5.4% 4.9% 4.5% 4.5% 4.5% 4.5% 4.5% Total Plan Beginning NAV $1,349 $1,552 $1,696 $1,870 $2,081 $2,301 $2,446 $2,577 $2,703 $2,824 $2,951 $3,084 $3,223 Yearly Net Growth $203 $145 $174 $210 $221 $144 $131 $126 $122 $127 $133 $139 $145 Total Plan Ending NAV $1,552 $1,696 $1,870 $2,081 $2,301 $2,446 $2,577 $2,703 $2,824 $2,951 $3,084 $3,223 $3,368 Target Private Equity Allocation 10.0% 10.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% Target Private Equity NAV $155 $170 $224 $250 $276 $293 $309 $324 $339 $354 $370 $387 $ % current NAV 19.3% total exposure (NAV + Unfunded) 12.0% target allocation $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Total Projected Plan Assets and Target Private Equity Allocation Actual Projected Total Plan Ending NAV Target Private Equity NAV Net plan growth derived from target investment return plus contributions, less payouts and expenses 40

40 Existing Commitments Existing private equity and private debt investments are entered into the model by strategy and vintage year Current exposures create a baseline of existing allocations Provides context for expected cash flows of existing commitments Private Equity NAVs and Exposures Current exposure modeled by vintage and strategy Investment Strategy Buyouts Co-Investments Distressed Energy Fund of Funds Growth Equity Mezzanine Secondaries Special Situations Venture Total / Weighted Average Current Capital Total % of Valuation to be Current Total (NAV) Funded Exposure Exposure $46.7 $42.7 $ % $3.3 $16.9 $20.2 6% $24.8 $3.5 $28.2 8% $20.5 $15.3 $ % $40.3 $31.8 $ % $0.9 $0.1 $0.9 0% $5.3 $1.2 $6.6 2% $35.6 $32.4 $ % $1.4 $16.1 $17.5 5% $11.8 $10.2 $22.0 6% $190.6 $170.3 $ % Private Equity Investments by Vintage Year 2% 0% 19% Private Equity Portfolio Exposure 5% 6% 20% 10% 25% 8% 5% Buyouts Co-Investments Distressed Energy Fund of Funds Growth Equity Mezzanine Secondaries Special Situations Venture Vintage Year Commitment Paid In Capital Capital to be Funded Cumulative Distributed Current Valuation (NAV) Total Value Net Benefit Call Ratio DPI Ratio TVPI Ratio 2009 $60.0 $50.0 $10.0 $41.2 $29.1 $70.3 $ % 0.82x 1.41x 2010 $5.0 $4.8 $0.3 $4.0 $4.0 $8.0 $3.2 95% 0.84x 1.68x 2011 $82.0 $70.6 $11.4 $33.1 $66.1 $99.2 $ % 0.47x 1.41x 2012 $37.5 $28.7 $8.8 $6.0 $31.8 $37.7 $9.0 77% 0.21x 1.31x 2013 $45.6 $29.1 $16.5 $2.7 $29.2 $31.9 $2.9 64% 0.09x 1.10x 2014 $39.6 $15.9 $23.6 $0.0 $17.8 $17.8 $1.9 40% 0.00x 1.12x 2015 $55.0 $10.7 $44.3 $0.3 $10.3 $10.6 ($0.2) 20% 0.03x 0.99x 2016 $58.0 $2.5 $55.5 $0.0 $2.2 $2.2 ($0.3) 4% 0.00x 0.88x Total Private Equity $382.6 $212.4 $170.3 $87.3 $190.6 $277.9 $ % 0.41x 1.31x 41

41 Commitment Pacing Through an iterative process, annual investments are modeled based on macro conditions, plan strategic objectives, and existing investments assumptions $120 Actual Private Equity Commitments by Vintage Year Projected $100 $80 $60 $40 $55 $58 $75 $70 $70 $80 $80 $90 $100 $100 $100 $100 $20 $40 $ Total Commitments Private Equity Commitments by Vintage Year Actual More Certain Less Certain Year Total Commitments $40 $55 $58 $75 $70 $70 $80 $80 $90 $100 $100 $100 $100 42

42 Private Equity and Private Debt Plan Projections giving rise to longer term plan projections Red line is the 12% target PE & PD allocation based on projected plan total NAV; Black dashed line is the 1.5x over-commitment. Goal is to keep private markets NAV (green bar) plus uncalled capital commitments (blue bar), between red line and black dashed line. Private Equity Plan Projections $700.0 $600.0 Actual Projected $500.0 $400.0 $300.0 $200.0 $100.0 $ Existing PE Investments NAV New PE Investments NAV Existing PE Investments Uncalled Capital New PE Investments Uncalled Capital Target Private Equity NAV Target Private Equity Over Allocation Actual Projected Year Private Equity NAV $120 $169 $191 $257 $282 $305 $323 $336 $350 $368 $367 $379 $397 Uncalled Capital Commitments $134 $139 $170 $156 $147 $137 $140 $143 $154 $168 $177 $182 $184 Private Equity NAV + Uncalled Capital Commitments $255 $308 $361 $413 $429 $442 $463 $479 $503 $536 $544 $560 $581 Target Private Equity NAV $155 $170 $224 $250 $276 $293 $309 $324 $339 $354 $370 $387 $404 Over-Commitment Pace 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x Target Private Equity Over Allocation $233 $254 $337 $375 $414 $440 $464 $486 $508 $531 $555 $580 $606 Private Equity Percent of Total Plan Assets Private Equity NAV 7.8% 10.0% 10.2% 12.4% 12.3% 12.5% 12.5% 12.4% 12.4% 12.5% 11.9% 11.7% 11.8% Private Equity Uncalled Capital Commitments 8.7% 8.2% 9.1% 7.5% 6.4% 5.6% 5.4% 5.3% 5.4% 5.7% 5.7% 5.6% 5.5% NAV + Uncalled Capital Commitments 16.4% 18.1% 19.3% 19.9% 18.6% 18.1% 18.0% 17.7% 17.8% 18.2% 17.6% 17.4% 17.3% Target Private Equity Allocation 10.0% 10.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 43

43 Historical Commitments by Strategy Sample Private Equity Program Client began committing to Private Equity in 2009 and today has a diversified program Early commitments centered on secondaries, distressed and fund of funds Later commitments have pivoted toward more direct exposures $90 Private Equity Commitments by Vintage Year $80 $70 $15 $60 $50 $40 $30 $20 $10 $0 $22 $3 $8 $25 $15 $10 $25 $8 $25 $10 $10 $10 $20 $1 $9 $18 $30 $11 $10 $30 $20 $15 $10 $10 $10 $ Buyouts Special Situations Co-Investments Distressed Energy Fund of Funds Growth Equity Mezzanine Secondaries Venture Private Equity Commitments by Vintage Year Actual Actual Actual Actual Actual Actual More Certain Less Certain Year Buyouts $20 $10 $10 $10 $30 $40 $14 $14 $16 $16 $18 $20 $20 $20 $20 Special Situations $18 $15 $7 $7 $8 $8 $9 $10 $10 $10 $10 Co-Investments $10 $10 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Distressed $15 $25 $0 $11 $11 $12 $12 $14 $15 $15 $15 $15 Energy $22 $11 $10 $0 $7 $7 $8 $8 $9 $10 $10 $10 $10 Fund of Funds $9 $30 $20 $10 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Growth Equity $1 $10 $11 $11 $12 $12 $14 $15 $15 $15 $15 Mezzanine $10 $0 $4 $4 $4 $4 $5 $5 $5 $5 $5 Secondaries $25 $15 $25 $15 $0 $11 $11 $12 $12 $14 $15 $15 $15 $15 Venture $5 $8 $8 $3 $10 $7 $7 $8 $8 $9 $10 $10 $10 $10 Total Commitments $60 $5 $82 $38 $46 $40 $55 $58 $75 $70 $70 $80 $80 $90 $100 $100 $100 $100 44

44 Portfolio Implementation Case Study

45 Client Case Study The client is a ~$200 million foundation which started with a 12% target to private equity and private debt in aggregate, which recently increased to 20% The client initiated its private equity program in 2007 with its first secondary fund commitment and its private debt program in 2008 with its first distressed debt commitment The client has made commitments in the $5 to $10 million range since the initiation of the program, beginning with secondary funds, which tend to get capital put to work quickly due to the fact that they are buying into existing portfolios of assets. For that reason, they also tend to begin distributing cash more quickly In 2013, the client took advantage of the dislocation in the credit market and made an opportunistic commitment to two senior lending funds While the portfolio is not yet mature enough to generate sufficient distributions to cover its capital calls, it has been in positive territory since its second year

46 Annual Commitments by Strategy $18 $16 $14 $12 $10 $8 $6 $4 $2 Private Equity and Private Debt Commitments by Vintage Year ($Millions) $ Venture Growth Equity Buyouts Special Situations/Turnaround Secondaries Direct Lending Opportunistic Credit Distressed Mezzanine Private Equity and Private Debt Commitments by Vintage Year ($Millions) Year Venture $4 Growth Equity $4 Buyouts $4 Special Situations/Turnaround $4 Secondaries $2 $5 $3 $3 $5 Direct Lending $8 Opportunistic Credit $2 Distressed $4 $6 $4 Mezzanine $5 $5 Total Commitments $2 $9 $5 $6 $7 $8 $17 $5 $9 Sample only. Past performance is no guarantee of future results.

47 Performance Since Program Inception Private Equity Performance ($Millions) Year Cumulative Commitments $2 $7 $7 $7 $14 $18 $25 $30 $34 Cumulative Funded ($0) ($1) ($2) ($3) ($5) ($9) ($11) ($15) ($17) Cumulative Distributions $0 $0 $0 $1 $1 $3 $4 $6 $8 NAV $0 $1 $3 $5 $6 $10 $12 $18 $16 Total Value $0 $1 $3 $5 $7 $12 $16 $24 $24 Total Value/Paid in Capital Multiple 1.0x 0.9x 1.6x 1.8x 1.4x 1.4x 1.5x 1.6x 1.4x Private Debt Performance ($Millions) Year Cumulative Commitments $0 $4 $9 $15 $15 $19 $29 $29 $34 Cumulative Funded ($1) ($2) ($4) ($7) ($9) ($13) ($19) ($25) Cumulative Distributions $0 $0 $0 $1 $2 $4 $6 $10 NAV $1 $3 $5 $7 $10 $12 $18 $19 Total Value $1 $3 $5 $8 $11 $16 $24 $29 Total Value/Paid in Capital Multiple NA 1.2x 1.4x 1.3x 1.2x 1.2x 1.3x 1.3x 1.2x Sample only. Past performance is no guarantee of future results.

48 Historical Private Equity and Private Debt Pacing $80 Historical Private Equity and Private Debt Pacing $70 $60 $50 $40 $30 $20 $10 $ Private Equity NAV PE Uncalled Capital Commitments Private Debt NAV PD Uncalled Capital Commitments Target PE and PD NAV Target PE and PD Over Allocation Year Private Equity NAV $0 $1 $3 $5 $6 $10 $12 $18 $16 PE Uncalled Capital Commitments $2 $3 $2 $1 $6 $13 $11 $13 $14 PE NAV + Uncalled Capital Commitments $2 $4 $5 $6 $12 $23 $23 $30 $29 Private Debt NAV $0 $1 $3 $5 $7 $10 $12 $18 $19 PD Uncalled Capital Commitments $0 $3 $7 $11 $9 $23 $11 $6 $8 Private Debt NAV + Uncalled Capital Commitments $0 $4 $10 $16 $16 $33 $23 $24 $27 Total PE and PD NAV $1 $2 $6 $10 $13 $19 $24 $36 $35 Total PE and PD Uncalled Capital Commitments $2 $6 $9 $12 $15 $37 $23 $18 $22 PE and PD NAV + Uncalled Capital Commitments $2 $8 $15 $22 $28 $56 $47 $54 $56 Target PE and PD NAV $26 $19 $21 $23 $22 $27 $29 $28 $45 Over-Commitment Pace 1.5x 1.5x 1.5x 1.5x 1.5x 1.5x 1.5x 1.5x 1.5x Target PE and PD Over Allocation $39 $28 $32 $34 $33 $41 $44 $43 $67 Target PE and PD Allocation 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 20.0% Sample only. Past performance is no guarantee of future results.